It also cut Indonesia from marketweight to underweight, citing high inflation and the significant current account deficit, even though Indonesia's valuations have fallen to around historical averages. Goldman said it expected "significant downside risks" to consensus earnings forecasts for Indonesia.

The bank kept an underweight call on India, expecting weak earnings and economic growth. "Foreigners have only sold $4 billion of Indian equities so far. Relative to the $12 billion of year-to-date inflows, positioning looks extended."

But it raised the Philippines to marketweight from underweight, as the country's valuations have become less expensive, its economic growth remains strong and the bank expects higher earnings growth forecasts.

Outside the region, Goldman remained overweight on Japanese and European equities, but underweight on the U.S. and Asia ex-Japan on a 12-month view.

"We see strong longer-term return potential in Europe from a recovery of cyclically weak margins. With high frequency data continuing to support our view of a gradual improvement in European growth we think some of this potential will turn into outperformance over 12 months," Goldman said.

"In the U.S., valuations are higher than in other regions and margins are close to record highs, leaving less room for a cyclical recovery than elsewhere."

For Japan, Goldman saw catalysts from significant policy changes, the weakening of the yen, growing evidence of rising inflation and expanding profits.